The information below provides an overview of the Capital Gains Tax (CGT) concessions available for small business and the basic conditions you must satisfy to access these concessions. The concessions reduce the capital gain on business assets that you must include in your assessable income.
Your must first satisfy the basic conditions that apply to all the CGT concessions for small business. You must then satisfy any additional conditions that apply specifically to the individual concessions.
You can apply as many concessions as you are entitled to, until the capital gain is reduced to nil. This choice allows you to achieve the best tax results for your circumstances. There are rules about the order you apply the CGT small business concessions, any current year or prior year capital losses and the CGT discount.
WHAT ARE THE CGT CONCESSIONS?
There are four small business CGT concessions.
SMALL BUSINESS 15-YEAR EXEMPTION
If your business has owned an asset for 15 years and you are aged 55 years or over and are retiring, or if you are permanently incapacitated, you won’t have an assessable capital gain when you sell the asset. Click here for more information
SMALL BUSINESS 50% ACTIVE ASSET REDUCTION
You can reduce the capital gain on a business (active) asset by 50%. Click here for more information
SMALL BUSINESS RETIREMENT EXEMPTION
A capital gain from the sale of a business asset will be exempt up to a lifetime limit of $500,000. If you are under 55 years of age, the exempt amount must be paid into a complying superannuation fund or a retirement savings account to obtain the exemption. Click here for more information
SMALL BUSINESS ROLLOVER
If you sell a small business asset, you can defer your capital gain until a later year. This means you don’t include the gain in your income until a change in circumstances causes a CGT event to happen that crystallises the gain. For example, you don’t acquire a replacement asset within the required period, or you later sell that replacement asset or stop using it in your business. When a CGT event crystallises the gain you have previously deferred, all or part of the gain that you deferred becomes assessable. Click here for more information
BASIC CONDITIONS TO BE SATISFIED
To qualify for any of the small business CGT concessions, there are certain basic conditions that must be satisfied. Follow the steps below to determine whether you satisfy the basic conditions.
You must first satisfy at least one of the following conditions:
- You are a small business entity.
- You satisfy the maximum net asset value test; or
- You are either partner in a partnership that is a small business entity, and the CGT asset is an asset of the partnership.
In addition to satisfying one of the conditions outlined in step 1, the asset must satisfy the active asset test.
This step only applies if the CGT asset is a share in a company or an interest in a trust. Where this is the case, one of these additional basic conditions must be satisfied just before the CGT event:
- You must be a CGT concession stakeholder in the company or trust; or
- The entity that owns the share or interest must satisfy the 90% test.
Please consult with Rogerson Kenny Business Accountants on any small business Capital Gains Tax matter. You can call us on (03) 9802 2533.